This site uses cookies to provide you with a more responsive and personalized service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print this page

Weekly Oil & Gas Market Highlights: September 20, 2012

Deloitte Center for Energy Solutions publication

Subscribe to the weekly Oil & Gas Market Highlights Memo Sign up to receive the weekly Oil & Gas Market Highlights Memo

Key Oil & Gas Price Indicators

Front Month Futures (August) September 20, 2012 September 13, 2012 % Change
Oil – WTI
(USD per barrel)
$91.87 $98.31 -6.6%
Oil – Brent
(USD per barrel)
$110.03 $116.90 -5.9%
Natural Gas – NYMEX Henry Hub
(USD per MMBtu)
$2.80 $3.04 -7.9%

Data sources: Bloomberg; CME Group

Crude Oil Prices

Crude oil futures tumbled this week in a sell-off triggered by mounting concerns about global oil demand, rumors of oil release from the U.S. Strategic Petroleum Reserve, sustained supplies from Saudi Arabia, and rise in U.S. oil inventories. On Monday, oil plummeted $3 per barrel in a minute on high-volume selling, which left traders guessing about the reason for the fall and the direction of oil prices.

Closing price
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg

  1. Crude futures continued their recent rise during Asian trading last Friday, September 14, on news of the Federal Reserve’s newly announced third round of quantitative easing (QE3). The Fed committed to open-ended buying of $40 billion per month of mortgage-backed securities, which took market analysts by surprise as previous rounds of easing have had a specific end-date. The news sent the dollar plunging, which is bullish for dollar-denominated crude. However, many analysts expect to see a case of “buy the rumor, sell the fact” play out in the market as speculation about future easing comes to an end. Oil prices were also supported by the mounting tensions in the Middle East. Anti-American protests broke out across most parts of the region, including Egypt, Iraq, Iran, and Yemen. The International Atomic Energy Agency (IAEA) also approved a U.S.-drafted resolution condemning Iran’s continued defiance over its nuclear program. Iran remains under Western-backed oil sanctions that are estimated to have removed over 1 MMbbl/d of Iranian production from the market. WTI crude futures closed at $99 per barrel on Friday, up $0.69 per barrel. Oil prices are up 2% in the month of September.
  2. On Monday, oil futures traded sideways during early trading on light profit-taking from last week’s run-up in the prices. Prices began to rise again in New York trading as concerns grew about tensions in the Middle East. Over the weekend, the head of Iran’s Revolutionary Guard said that if the country was attacked, it would retaliate against U.S. bases and close the Strait of Hormuz. However, 40 minutes before the day’s close, crude futures dropped more than $3 per barrel in just 60 seconds, on a huge spike in trading volume. Many traders were caught off guard and suspected a “fat-finger” trade may have been the cause. The new low price did not quickly turn around and the CME Group stated that there had been no technical issues involved. Traders, still bewildered by the rapid selloff, believe that speculation of an impending release from the Strategic Petroleum Reserve (SPR) may have been the cause. However, the White House stated that the Obama administration had no plans to release oil from the SPR. The rapid correction in the oil market caused the prices of other commodities such as gold and copper also to fall. The Commodities Futures Trading Commission is gathering information on the price fall. U.S. crude futures closed down 2.4% at $96.62 per barrel.
  3. Crude futures fell in Asian trading amid concerns about Monday’s crash in the futures price and weakening oil demand. Speculation about the cause of the flash crash on Monday dominated the day’s trading – while some traders attributed it to expectations of a release from the SPR, others believed that the bearish oil market fundamentals are asserting themselves. Saudi Arabia plans to maintain its output above 10 MMbbl/d, keeping supplies flowing in an already saturated global oil market. Spain sold ~$6 billion in short-term debt at an interest rate of ~6%, which many economists consider to be unsustainable. The euro also weakened by over 0.5% versus the dollar, which put downward pressure on prices. A bearish revision in FedEx’s profit estimate for the year also dampened demand expectations as the company is a heavy user of petroleum fuels.
  4. In Asian trading, the Bank of Japan announced that it would begin an asset purchase program to stimulate the nation’s economy, which led to a modest uptick in the oil price. However, oil futures tumbled in London trading on profit-taking and in anticipation of the Energy Information Administration’s (EIA) oil stocks report due later in the day. Crude oil prices continued falling as the EIA announced that crude stocks were up 8.5 million barrels to 367.6 MMbbl, 8.4% higher than last year. Gasoline stocks were down 1.4 MMbbl to 193.6 MMbbl, while gasoline demand was at 8.6 MMbbl/d, down 2.6% from a year ago. Distillate stocks were down 300,000 barrels to 128.2 MMbbl. Crude futures settled down 3.5% on the day, the largest single-day decline in prices since late July. During the week, crude prices have tumbled over $7.
  5. On Thursday, oil prices fell further on news that China’s Purchasing Manger’s Index (PMI) registered a slight preliminary uptick to 47.8 estimated for September, from 47.6 in August. However, if accurate, this would be the longest trend below 50—the number that would indicate expansion—in the eight years the data has been collected. In Japan, export data from the finance ministry offered little hope for an export-driven revival of the economy as a strong yen and falling overseas demand helped widen the country’s trade deficit. Exports to Europe are down 28% from a year ago and exports to Asia are down 6.7%. Further exacerbating Japan’s deficit is an increase in energy imports as most of its nuclear plants have been shut down as a result of the tsunami last year. Together the U.S., China, and Japan account for just under 40% of the world’s oil consumption. U.S. crude futures dropped by 11 cents and settled at $91.87 per barrel.

Natural Gas Prices

U.S. Henry Hub natural gas futures fell by ~25 cents and closed below $2.80 per MMBtu. The mild weather forecast, rising production despite falling rig counts, ongoing build-up in inventories, and dwindling demand weighed on prices.

Closing price
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg

  1. Natural gas futures fell ~3% during last Friday’s trading as a forecast of milder temperatures put downward pressure on prices. The National Weather Service forecast showed below-normal temperatures in the East Coast and Mid-Continent, with above-normal temperatures along the West Coast and in Florida. Nuclear power plant outages, which some traders are hopeful will boost gas demand, were 10,100 MW (10%) on Friday, up from 9,100 MW the day before and from 7,500 MW a year ago. However, gas stocks are 11% above year-ago levels, which is bearish for the market. Baker Hughes’s weekly rig count data showed that natural gas directed rigs were down to 448, the lowest level since the summer of 1999. The gas rig count is down over 50% since its peak of 936 in October 2011.
  2. On Monday, natural gas futures fell for the third straight day as summer heating demand nears the shoulder season and production and storage are at record levels. Although nuclear power plant outages are up year-on-year, the price of Central Appalachian coal is at a two-year low of ~$2.25 per MMBtu, indicating that power utilities may begin to switch back to coal. If that occurs, weekly gas storage builds, which have been below average for much of the summer, could return to normal levels and fill gas storage to near capacity. With the fundamentals looking bearish, natural gas futures ended the day down 7.8 cents (~2.7%) at $2.86 per MMBtu.
  3. On Tuesday, futures remained under pressure as a result of bearish fundamentals and forecasts of mild temperatures. Although some see potential upside from nuclear power outages, power demand is beginning to soften as air-conditioning needs begin to drop with the temperature. Bears also note lingering concerns that rising gas in storage may reach capacity by late October, forcing additional supplies into the market. Futures were down 3.2% and closed at $2.77 per MMBtu.
  4. Natural gas futures fell for the fifth straight day on Wednesday on continued concerns about mild temperatures and a potentially bearish shoulder season with high storage builds. Nuclear power plant outages, although up year-on-year, are proving inadequate to support natural gas prices as a result of slowing demand for air conditioning. Coal prices have also fallen to a two-year low, making coal a more attractive option than natural gas for some utilities.
  5. Natural gas futures rose on Thursday, ending a five-day losing streak, as the build-up in weekly inventories of 67 Bcf was in line with market expectations and below last year’s build of 89 Bcf. Last week, U.S. consumption of natural gas fell 3.7% led by a 13% decline in natural gas for power generation, while total gas supply rose 1.3%. Futures closed up 3.5 cents (1.3%) at ~$2.80 per MMBtu.

Futures Curve

U.S. Henry Hub natural gas is in “contango” due to limited storage capacity (current natural gas inventories are ~9% higher than the five-year average). June 2013 natural gas futures are 27% higher than spot prices, compared to just 2% for oil.

Data source: Factset

Weekly U.S. Crude Oil and Natural Gas Data

Crude Oil
Indicators This Period* Prior Period* % Change
Refinery Inputs (MMBPD) 14.92 14.32 4.19%
Gasoline Demand (MMBPD) 8.63 8.70 -0.80%
Distillate Demand (MMBPD) 3.69 3.27 12.84%
Production (MMBPD) 6.27 5.53 13.38%
Imports (MMBPD) 9.85 8.57 14.94%
Stocks (million barrels) 367.6 359.1 2.37%
Rotary Rig Count 1,413 1,409 0.28%
Natural Gas*
Indicators This Period* Prior Period* % Change
Consumption (Bcf)** 1,847 (Jun 12) 1,852 (May 12) -0.27%
Gross Withdrawals (Bcf)** 2,424 (Jun 12) 2,532 (May 12) -4.27%
Canadian Imports (Bcf)** 250.04 (Jun 12) 240.37 (May 12) 4.02%
LNG Imports (Bcf)** 8.26 (Jun 12) 16.21 (May 12) -49.04%
Working Storage (Bcf) 3,496 3,429 1.95%
Rotary Rig Count 448 452 -0.88%
Horizontal Rig Count 1,133 1,135 -0.18%

*The EIA did not release a natural gas report this week due to the U.S. Independence Day holiday. Thus, this period data is for the week ending June 27 and prior period data is for the week ending June 20.
**The EIA does not provide weekly natural gas consumption, withdrawals, and imports numbers. Thus, the latest available monthly numbers are reported above.
Data source: U.S. Energy Information Administration (EIA)

Comments and questions welcomed. Please contact

Learn more

Deloitte’s new report, On The Road Again: Managing Transportation Logistics for Unconventional Drilling, discusses how the surge in shale development significantly increases the transportation and logistics requirements at the well site. This article explores the impact of these requirements on safety, cost and productivity concerns for oil and gas operators and the opportunities for operators to take an active approach to managing transportation and to drive greater value for the company.

Deloitte's new report, 2012 Midyear Report, Oil & Gas Mergers and Acquisitions: An uncertain pricing outlook dampens activity, covers deals from the past six months by sector and reveals the insights of Deloitte M&A specialists on what is driving activity and what this says about how the business is changing. The report also discusses a slowing of dry gas activity, while the Gulf of Mexico picks up; continued consolidation, as companies face the challenges of a new energy landscape; weak natural gas prices, a declining U.S. rig count, and lower deal activity; and, activity overseas and interest from atypical buyers.

Deloitte MarketPoint LLC and the Deloitte Center for Energy Solutions have developed an assessment of the potential economic impact of LNG exports from the United States based upon various assumptions. Made in America: The Economic Impact of LNG Exports from the United States summarizes the findings of alternative scenarios regarding U.S. LNG exports and offers related strategic insights.

Save this date

November 13, 2012
Deloitte Oil & Gas Conference – Houston, TX
For more information on the 2012 Deloitte Oil & Gas Conference please contact

May 21-22, 2013
Deloitte Energy Conference – Washington, DC
For more information or to obtain a synopsis of the 2011 Deloitte Energy Conference, please contact

About the Deloitte Center for Energy Solutions
The Deloitte Center for Energy Solutions provides a forum for innovation, thought leadership, groundbreaking research, and industry collaboration to help companies solve the most complex energy challenges.

Through the Center, Deloitte’s Energy & Resources Group leads the debate on critical topics on the minds of executives—from the impact of legislative and regulatory policy, to operational efficiency, to sustainable and profitable growth. We provide comprehensive solutions through a global network of specialists and thought leaders.

With locations in Houston and Washington, D.C., the Deloitte Center for Energy Solutions offers interaction through seminars, roundtables and other forms of engagement, where established and growing companies can come together to learn, discuss and debate.

As used in this document, ‘Deloitte’ means Deloitte LLP (and its subsidiaries). Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.


Share this page

Email this Send to LinkedIn Send to Facebook Tweet this More sharing options

Stay connected